The debt ceiling is back, but no need to worry – yet

The nation’s debt ceiling was reinstated Thursday, giving congressional Republicans yet another divisive challenge to contend with in 2025.

The nation’s debt ceiling was reinstated Thursday, giving congressional Republicans yet another divisive challenge to contend with in 2025. President-elect Donald Trump is demanding that GOP lawmakers address the limit before he takes office on January 20, but lawmakers have some time since the US is likely months away from a potential first-ever default on its obligations. The new ceiling is the amount of debt outstanding at the end of the previous day. That figure stood at just under $36.2 trillion earlier in the week, up from $31.4 trillion in June 2023, when the cap was suspended as part of the bipartisan Fiscal Responsibility Act. But in a technical quirk, the nation won’t actually be at the limit on Thursday, allowing the Treasury Department to continue borrowing for a little longer to pay the federal government’s bills in full and on time. The debt level is projected to dip by $54 billion that day due to the scheduled redemption of certain securities, according to a letter Treasury Secretary Janet Yellen sent to congressional leaders on Friday afternoon. Therefore, the US isn’t expected to reach the reinstated limit until sometime between January 14 and January 23, Yellen wrote in her letter. It will then be necessary for the Treasury Department to start taking so-called extraordinary measures to prevent a default. That’s because the nation spends more than it receives in revenue, and it has to borrow to cover the difference. But it can’t once it hits the debt limit. Yellen – or the acting agency leader if the limit is reached after Trump’s inauguration on January 20 – will inform Congress at that time and outline how the department will proceed. The letter also will likely provide lawmakers with an estimate of when these efforts could be exhausted, or the so-called X date.